Publishing Republic Act No. 6110, Amending Among others Sections 137(b), 148, and 160 of Title IV of the National Internal Revenue Code, as Amended

February 10, 1970 REVENUE MEMORANDUM CIRCULAR NO. 07-70 SUBJECT : Publishing Republic Act No. 6110, Amending Among others Sections 137(b), 148, and 160 of Title IV of the National Internal Revenue Code, as Amended TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, there are quoted hereunder pertinent sections of Republic Act No. 6110, amending certain sections of Title IV of the National Internal Revenue Code, as amended, relating to specific taxes, viz.: " Republic Act No . 6110 " An Act Amending Certain Provisions of the National Internal Revenue Code, as Amended " Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled : xxx xxx xxx "SEC. 24. Section one hundred and thirty-seven (b) of the same Act is hereby amended to read as follows: "SEC. 137. (a) . . . "(b) Cigarettes "(1) On cigarettes containing Philippine-grown flue-cured and/or re-dried Virginia type tobacco of seventy-one millimeters or less in length, on each thousand, eight pesos: Provided , That if the length exceeds seventy-one millimeters, the tax shall be increased by one hundred per centum . "(2) On cigarettes containing Philippine-grown Virginia type tobacco blended with imported Virginia type tobacco and/or flue-cured tobacco of seventy-one millimeters or less in length, on each thousand, twelve pesos: Provided , That if the length exceeds seventy-one millimeters, the tax shall be increased by one hundred per centum . "(3) On cigarettes made of leaf tobacco other than Philippine-grown flue-cured and/or re-dried Virginia type tobacco and imported Virginia type tobacco of eighty-one millimeters or less in length, packed in thirty cigarettes or more per pack, on each thousand, two pesos and fifty centavos: Provided , That if the length exceeds eighty-one millimeters, the tax shall be increased by fifty per centum : Provided , further , That if the length exceeds one hundred twenty-one millimeters, on each thousand the tax shall be increased by one hundred per centum . If the cigarettes under this subparagraph are packed in twenty cigarettes or less per pack and the length does not exceed eighty-one millimeters, on each thousand the tax shall be three pesos: Provided , That if the length exceeds eighty-one millimeters, the tax shall be increased by fifty per centum : Provided , further , That if the length exceeds one hundred twenty-one millimeters, the tax shall be increased by one hundred per centum . "All duly registered and/or existing brands or cigarettes at the time of the approval of this Act, falling under subparagraphs (1) and (2), paragraph (b) of this section, shall not be allowed to be classified under sub-paragraph (3) hereof, regardless of the kind of leaf tobacco used. "(4) If the cigarettes are mechanically wrapped or packed or are manufactured purely out of imported leaf tobacco, the tax shall be increased by one hundred and twenty per centum per thousand cigarettes. "Cigarettes shall be considered as mechanically wrapped or packed when at any stage of the wrapping or packing, a machine or any mechanical contrivance shall have been used. "Any provision of Republic Act Numbered Twelve hundred eighty-seven to the contrary notwithstanding, any process of chemical treatment of tobacco leaves shall not be allowed. "The maximum price at which the various classes of cigars are sold at wholesale in the factory or in the establishment of the importer to the public shall determine the rate of the tax applicable to such cigars; and if the manufacturer or importer also sells, or allows to be sold, his cigars at wholesale in another establishment of which he is the owner or in the profits of which he has an interest, the maximum sale price in such establishment shall determine the rate of the tax applicable to the cigars therein sold: Provided , however , That when such maximum wholesale price is less than the cost of manufacture or importations plus all expenses incurred until the cigars are finally sold by the manufacturer or importer, such cost plus expenses shall determine the amount of tax to be applied. "Every manufacturer or importer of cigars shall file with the Commissioner of Internal Revenue on the date or dates designated by the latter, a sworn statement showing the maximum wholesale prices of cigars, together with the cost of manufacture or importation plus expenses incurred or to be incurred until the cigars are finally sold and it shall be unlawful to sell said cigars at wholesale at a price in excess of the one specified in the statement required by this Title without previous written notice to said Commissioner of Internal Revenue. In the case of imported cigars, the sworn statement required herein shall be accompanied by verified sales invoices of the manufacturers of the cigars as well as the consular invoice issued by a Philippine Consul, should one be available at the place of origin or shipment. "Every manufacturer or importer of cigarettes shall file with the Commissioner of Internal Revenue, on the date or dates designated by the latter, a sworn statement showing the quantity and value of sun-dried, flue-cured and/or re-dried or imported Virginia-type tobacco or other types of tobacco purchased, imported or manufactured; the brand or brands of cigarettes manufactured or imported; their corresponding length in millimeters, whether containing flue-cured tobacco; whether the cigarettes are mechanically wrapped or packed; and indicating the names and address of the person or persons from which purchased. Every producer of Philippine-grown sun-dried Virginia tobacco or Philippine-grown flue-cured and/or re-dried Virginia tobacco shall, likewise file with the Commissioner of Internal Revenue a statement of the quantity and value of sun-dried or flue-cured and/or re-dried Philippine grown Virginia type tobacco produced by him and the names and addresses of his purchasers or the products. In the case of imported cigarettes, the sworn statement required herein shall, in addition to the above information, be accompanied by a verified commercial invoice of the manufacturer of the cigarettes as well as the consular invoice issued by a Philippine Consul, if any, containing the information that Philippine Internal Revenue strip stamps have been affixed to each and every pack of cigarettes and that such pack bears the inscription "for export to the Philippines." "If the government of a foreign country permits the revenue stamps of such country to be affixed in the Philippines to tobacco (including cigars) or snuff manufactured in the Philippines and imported into such foreign country, internal revenue stamps of the Philippines may be affixed to tobacco (including cigars) or snuff manufactured in such foreign country to be imported into the Philippines from such foreign country, under such rules and regulations as the Commissioner of Internal Revenue with the approval of the Secretary of Finance may prescribe. "Any producer, manufacturer, or importer who, in violation of this section, knowingly misdeclares or misrepresents in his report the type of tobacco produced, and the tobacco contents of manufactured or imported cigarettes shall upon conviction be required to pay twice the amount of the tax evaded and punished by a fine of not less than one thousand pesos nor more than five thousand pesos and by imprisonment of not less than one year nor more than six years." "SEC. 25. Section one hundred and forty-eight of the same Act is hereby amended to read as follows: "SEC. 148. Specific tax on saccharine . On saccharine, sodium saccharinate and all its derivatives or salts of saccharine and other artificial sweetening agents, there shall be collected a tax of seventy-five pesos per kilogram." "SEC. 26. Section one hundred and sixty of the same Act is hereby amended to read as follows: "SEC. 160. Information to be given by manufacturers, importers, indentors, and wholesalers of any apparatus or mechanical contrivance specially for the manufacture of articles subject to specific tax and importers, indentors, manufacturers or sellers of cigarette paper in bobbins, cigarette tipping paper or cigarette filter tips . Manufacturers, indentors, wholesalers and importers of any apparatus or mechanical contrivance specifically for the manufacture of articles subject to specific tax shall before any such apparatus or mechanical contrivance is removed from the place of manufacture or from the customhouse, give written information to the Commissioner of Internal Revenue as to the nature and capacity of the same, the time when it is to be removed, and the place for which it is destined as well as the name of the person by whom it is to be used; and such apparatus or mechanical contrivance shall not be set up nor dismantled or transferred without a permit in writing from the Commissioner of Internal Revenue. "A written permit from the Commissioner of Internal Revenue for importing, manufacturing or selling of cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter tips is required before any person shall engage in the importation, manufacture, or sale of the said articles. No permit to sell said article shall be granted unless the name and address of the prospective buyer is first submitted to the Commissioner of Internal Revenue and approved by him. Records showing the stock of the said articles and the disposal thereof by sale to persons with their respective addresses as approved by the Commissioner of Internal Revenue shall be kept by the seller, and records showing stock of said articles and consumption thereof shall be kept by the buyer, subject to inspection by internal revenue officers. "It shall be unlawful for any person to have in his possession cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter tips, without the corresponding authority therefor issued by the Commissioner of Internal Revenue. Any person, importer, manufacturer of cigar and cigarettes, who has in his or its stock cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter tips and which are not supported by permit from the Commissioner of Internal Revenue shall be fined in an amount of not less than ten thousand pesos and imprisoned for not less than five years." xxx xxx xxx "SEC. 68. Effectivity Clause . This Act shall take effect on September 1, 1969: Provided, That where at the time of death or within six months thereafter no schedule of values as provided in Section 19 of this Act has been fixed in the areas where the properties of the decedent are located, the assessed values as shown in the tax rolls shall be considered as the fair market value, unless the contrary is shown: Provided , further , That the provisions of Sections 6, 11, 12, 13, 14, 15, and 16 of this Act shall apply to the entire taxable year in which this Act is approved: Provided , still further , That the provisions of Sections 76 and 77 of this Act shall be effective on July 1, 1970: Provided , finally , That the second paragraph of Section 358 as amended by this Act, shall be effective only for a period of four years from July 1, 1969 unless extended. Approved, August 4, 1969 . . ." FEATURES OF THE AMENDMENTS Section 137 , sub-section (b) : 1. The bases for determining the rates of specific tax on cigarettes taxable under subparagraphs (1), (2) and (3) of Sub-section (b), Section 137, have been reduced to three (3), as follows. (a) Kind of tobacco used as fillers (b) Length of the cigarettes and (c) Manner of packing The kind of wrapping or packing materials and the weight per thousand cigarettes have been deleted from the old law as criteria for determining the rates of specific tax on cigarettes. The amendment eliminated the loopholes or technicalities under the old law which have heretofore given rise to enforcement difficulties or hair-splitting issues. As regards the kind or type of tobacco used as cigarette fillers, the following distinguishing features thereof should be noted with special attention: (a) Whether or not the tobacco is of the Virginia type; (b) Whether it is Philippine-grown or imported; and (c) Whether it is sun-dried, flue-cured or redried. 2. The rates of specific tax on cigarettes under the amendatory provisions of RA 6110 are as follows: (a) P8 . 00 per thousand cigarettes containing Philippine-grown flue-cured and/or redried Virginia type tobacco of 71 millimeters or less in length; and P16 . 00 per thousand cigarettes having the same tobacco contents as above if the length exceeds 71 millimeters. (b) P12 . 00 per thousand cigarettes containing Philippine grown Virginia type tobacco blended with imported Virginia tobacco and/or flue-cured tobacco of 71 millimeters or less in length; and P24 . 00 per thousand cigarettes having the same tobacco contents as above if the length exceeds 71 millimeters. (c) P2 . 50 per thousand cigarettes made of leaf tobacco other than Philippine-grown flue-cured and/or re-dried Virginia type tobacco and imported Virginia type of 81 millimeters or less, packed in 30 cigarettes or more per pack; P3 . 75 per thousand cigarettes made of the same leaf tobacco as above, packed in 30 cigarettes or more per pack if the length exceeds 81 millimeters but not exceeding 121 millimeters; P5 . 00 per thousand cigarettes made of the same leaf tobacco as above, packed in 30 cigarettes or more per pack if the length exceeds 121 millimeters; and (d) P3 . 00 per thousand cigarettes made of leaf tobacco other than Philippine-grown flue-cured and/or re-dried Virginia type and imported Virginia type tobacco, packed in 20 cigarettes or less per pack and the length does not exceed 81 millimeters; P4 . 50 per thousand cigarettes made of the same leaf tobacco as above, packed in 20 cigarettes or less per pack, if the length exceeds 81 millimeters but does not exceed 121 millimeters; and P6 . 00 per thousand cigarettes made of the same leaf tobacco as above, packed in 20 cigarettes or less per pack, if the length exceeds 121 millimeters. (e) If the cigarettes taxed at the rates above-enumerated are mechanically wrapped or packed as defined under the law, the tax per thousand cigarettes shall be increased by 120% as shown hereunder: Basic Rate Increased Rate P8.00 per m P17.60 per m 16.00 per m 35.20 per m 12.00 per m 26.40 per m 24.00 per m 52.80 per m 2.50 per m 5.50 per m 3.75 per m 8.25 per m 5.00 per m 11.00 per m 3.00 per m 6.60 per m 4.50 per m 9.90 per m 6.00 per m 13.20 per m (f) If the cigarettes taxed at the rates enumerated under items a and b are manufactured purely out of imported tobacco, the tax per thousand cigarettes shall be increased by 120% as shown hereunder: Basic Rate Increased Rate P8.00 per m P17.60 per m 16.00 per m 35.20 per m 12.00 per m 26.40 per m 24.00 per m 52.80 per m 3. A new paragraph was introduced under Section 137 (b) which provides that all duly registered and/or existing brands of cigarettes taxable under subparagraphs (1) and (2) at the basic rates of P8.00 and P12.00 per M, respectively, shall not be allowed to be classified under subparagraph (3), regardless of the kind of tobacco used. In short, it means that cigarettes taxed at P8.00, P16.00, P12.00, or P24.00 per M and duly registered under those tax brackets at time the law became effective, shall not be allowed to be reclassified to fall under any of the lower tax bracket of P2.50, 3.75, 5.00, 3.00, 4.50 and 6.00 per M as enumerated under subparagraph (3), regardless of the kind of tobacco used or to be used therefor. 4. Another amendment is the new provision of the law which prohibits any process of chemical treatment of tobacco leaves of the native type to convert the same into tobacco with the same appearance, taste and aroma as those leaf tobacco of the Virginia type. The amendment, in effect, repealed the pertinent provision of Republic Act No. 1287 which provides, among others, that any person, natural or juridical, who discovers or invents a new process, discovery or inventions for the conversion of native leaf tobacco into tobacco with the same appearance, taste and aroma as those of leaf tobacco of the Virginia type is granted the special privilege to exploit, produce and benefit from such process, discovery or invention to the exclusion of all others for a period of 25 years. 5. With the simplification of the criteria for determining the rates of specific tax on cigarettes under the provisions of RA 6110, the sworn statements required by law to be filed by manufacturers or importers of cigarettes have been amended accordingly, eliminating the information heretofore contained therein but no longer required to be indicated on the statements. However, the following additional information shall be indicated thereon as required by the amendatory law: (a) The quantity and value of sun-dried, flue-cured and/or redried or imported Virginia type tobacco or other types of tobacco purchased, imported or manufactured; (b) The brand or brands of cigarettes manufactured or imported; and (c) The names and addresses of the person or persons from whom purchased. 6. The amendment now requires every producer of Philippine-grown sun-dried Virginia tobacco or Philippine-grown flue-cured and/or redried Virginia tobacco to file with the Commissioner of Internal Revenue a statement showing: (a) The quantity and value of sun-dried or flue-cured and or redried Philippine-grown Virginia type tobacco produced by him and (b) The names and addresses of the purchasers of his products or tobacco crops. 7. A penal provision was introduced under Section 137 which provides that any producer, manufacturer or importer who, in violation of said Section, knowingly misdeclares or misrepresents in his report (sworn statement) the tobacco contents of the cigarettes manufactured or imported by him shall upon conviction a) be required to pay twice the amount of the tax evaded and b) punished by a fine of not less than P1,000 . 00 nor more than P5,000 . 00 and c) by imprisonment of not less than one (1) year nor more than six (6) years . Section 148 , Specific tax on saccharine : The amendment to this section clarified the extension of the term saccharine to include its derivatives as follows: (a) sodium saccharinate and (b) all its derivatives or salts of saccharine and (c) other artificial sweetening agents. Section 160 , Information to be given by importers , indentors manufacturers or sellers of any apparatus or mechanical contrivance specially for the manufacture of articles subject to specific tax and cigarette paper in bobbins , cigarette tipping paper or cigarette filter tips : The amendments to Section 160 consists of: (a) The inclusion of indentors and wholesalers among the persons required by law to secure a written permit from the Commissioner of Internal Revenue before any apparatus or mechanical contrivance specially for use in the manufacture of articles subject to specific tax is removed from the place of production or from the customhouse or before the same is set up, dismantled or transferred; and (b) The placing of cigarette tipping paper and cigarette filter tips under the same statutory requirements for the importation, manufacture or sale of cigarette paper in bobbins or rolls. As a consequence of this amendment, any person, importer or manufacturer of cigars and cigarettes found in possession of cigarette tipping paper or cigarette filter tips not supported by a permit or authority therefor, issued by the Commissioner of Internal Revenue shall, as in the case of unlawful possession of cigarette paper in bobbins or rolls, be fined in an amount of not less than P10,000.00, and imprisoned for not less than five (5) years. Just as in the case of cigarette paper in bobbins or rolls, the stocks and movement of cigarette tipping paper and/or cigarette filter tips shall be subject to same administrative and regulatory requirements concerning the keeping of stocks, manner of recording their movements and such other related permissive matters. Effectivity Republic Act No. 6110 took effect on September 1, 1969. Enforcement All internal revenue officers and others concerned are hereby enjoined to be guided accordingly and to give this circular as wide a publicity as possible. MISAEL P. VERA Commissioner of Internal Revenue APPROVED: CESAR VIRATA Acting Secretary of Finance